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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 1999 1-1225
AMERICAN HOME PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2526821
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Five Giralda Farms, Madison, NJ 07940-0874
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 660-5000
Securities registered pursuant to Section 12(b)
of the Act:
Name of each exchange on
Title of each class which registered
$2 Convertible Preferred Stock, $2.50 par value New York Stock Exchange
Common Stock, $0.33 - 1/3 par value New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value at March 15, 2000 $67,731,906,486
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Outstanding at
March 15, 2000
Common Stock, $0.33 - 1/3 par value 1,304,104,096
Documents incorporated by reference: List hereunder the following documents if
incorporated by reference and the Part of the Form 10-K into which the document
is incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statements; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.
(1) 1999 Annual Report to Shareholders - In Parts I, II and IV
(2) Proxy Statement filed March 17, 2000 - In Part III
PART I
ITEM 1. BUSINESS
General
American Home Products Corporation (the "Company" or "AHPC"), a
Delaware corporation organized in 1926, is currently engaged in the
discovery, development, manufacture, distribution and sale of a
diversified line of products in three primary businesses:
Pharmaceuticals, Consumer Health Care and Agricultural Products.
Pharmaceuticals include branded and generic human ethical
pharmaceuticals, biologicals, nutritionals, and animal biologicals
and pharmaceuticals. Principal products include women's health care
products, infant nutritionals, cardiovascular products, neuroscience
therapies, gastroenterology drugs, anti-infectives, vaccines,
biopharmaceuticals, oncology therapies, musculoskeletal therapies
and transplantation products. Principal animal health products
include vaccines, pharmaceuticals, endectocides and growth implants.
Consumer Health Care products include analgesics, cough/cold/allergy
remedies, vitamin, mineral and nutritional supplements, herbal
products, and hemorrhoidal, antacid and asthma relief items sold
over-the-counter. Agricultural Products include crop protection and
pest control products such as herbicides, insecticides and
fungicides.
Unless stated to the contrary, or unless the context otherwise
requires, references to the Company in this report include American
Home Products Corporation and its majority-owned subsidiaries.
On March 21, 2000, the Company announced that it signed a definitive
agreement with BASF Aktiengesellschaft ("BASF") for the sale of the
Cyanamid Agricultural Products business. Under the terms of the
agreement, which are subject to certain customary conditions,
including regulatory approval, BASF will pay AHPC $3.8 billion in
cash and will assume certain debt. The Company will record a non
cash loss on the sale of this business of approximately $1.5 billion
in the 2000 first quarter. The loss is due primarily to basis
differences for tax and financial reporting purposes, primarily
goodwill related to the Cyanamid Agricultural Products business.
On November 3, 1999, the Company and Warner-Lambert Company entered
into an agreement to combine the two companies in a merger-of-equals
transaction. On February 6, 2000, the merger agreement was
terminated. In accordance with the merger agreement, the Company
received a payment of $1.8 billion as a termination fee.
In July 1998, the Company purchased the vitamin and nutritional
supplement products business of Solgar Vitamin and Herb Company Inc.
and its related affiliates ("Solgar") for approximately $425 million
in cash.
In February 1998, the Company sold the Sherwood-Davis & Geck
medical devices business for approximately $1.770 billion. This
transaction completed the Company's exit from the medical devices
business.
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In December 1997, the Company sold the stock of Storz Instrument
Company and affiliated companies ("Storz"), a global manufacturer
and marketer of ophthalmic products, and certain assets related to
the Storz business for approximately $380 million.
In February 1997, the Company purchased the worldwide animal health
business of Solvay S.A. for approximately $460 million in cash.
In December 1996, the Company purchased the remaining equity
interest in Genetics Institute, Inc. ("G.I."), that it did not
already own for approximately $1.279 billion in cash. The purchase
price exceeded the net assets acquired by approximately $1.057
billion, resulting in the recognition of goodwill related to the
commercial operations of approximately $359 million and a special
charge of $470 million for the portion of the purchase price
attributable to acquired in-process research and development. G.I.
also recorded a special charge of approximately $228 million for the
liquidation of its outstanding stock options as of December 31,
1996.
In November 1996, the Company sold a majority interest (80%) in
the American Home Foods business for approximately $1.209 billion.
During 1998 and 1997, the Company sold its remaining equity interest
in International Home Foods, Inc., the successor to American Home
Foods.
Additional information relating to the Solgar and Solvay S.A.
acquisitions, and the Sherwood-Davis & Geck and Storz dispositions
is set forth in Note 2 of the Notes to Consolidated Financial
Statements in the Company's 1999 Annual Report to Shareholders
and is incorporated herein by reference.
Operating Segments
Financial information, by operating segment, for the three years
ended December 31, 1999 is set forth in Note 11 of the Notes to
Consolidated Financial Statements in the Company's 1999 Annual
Report to Shareholders and is incorporated herein by reference.
The Company is not dependent on any single or major group of
customers for its sales. The Company has four reportable
segments as outlined below. The product designations appearing
in differentiated type herein are trademarks.
PHARMACEUTICALS SEGMENT
The Pharmaceuticals segment manufactures, distributes, and sells
branded and generic human ethical pharmaceuticals, biologicals,
nutritionals, and animal biologicals and pharmaceuticals. These
products are promoted and sold worldwide primarily to wholesalers,
pharmacies, hospitals, physicians, retailers, veterinarians,
and other human and animal health care institutions. Some of
these sales are made to large buying groups representing certain
of these customers. Principal product categories for human use
and their respective products are: women's health care products
including PREMARIN, PREMPRO, PREMPHASE, LO/OVRAL (marketed as
MIN-OVRAL internationally), and TRIPHASIL (marketed as TRINORDIOL
internationally); infant nutritionals including S26 and 2ND AGE
PROMIL (international markets only); cardiovascular products
including CORDARONE and ZIAC; neuroscience therapies including
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ATIVAN, EFFEXOR and EFFEXOR XR; gastroenterology drugs including
ZOTON (international markets only); anti-infectives including
MINOCIN and ZOSYN (marketed as TAZOCIN internationally); vaccines
including HIBTITER; biopharmaceuticals including BENEFIX
Coagulation Factor IX (Recombinant) and RECOMBINATE Factor VIII
(Recombinant); oncology therapies; musculoskeletal therapies
including ENBREL, SYNVISC and LODINE XL; and transplantation
products. Principal animal health product categories include
vaccines, pharmaceuticals, endectocides and growth implants. The
Company manufactures these products in the United States and Puerto
Rico, and 19 foreign countries.
Sales of women's health care products in the aggregate, and the
PREMARIN family of products individually, accounted for more than
10% of consolidated net sales in 1999 and 1998. Sales of women's
health care products in the aggregate accounted for more than 10%
of consolidated net sales in 1997. Additionally, women's health
care products in the aggregate, and the PREMARIN family of products
individually, were greater than 10% of consolidated operating
income (loss) before taxes in 1999, 1998 and 1997. Except for the
products noted above, no other single pharmaceutical product or
category of products accounted for more than 10% of consolidated
net sales in 1999, 1998 or 1997.
CONSUMER HEALTH CARE SEGMENT
The Consumer Health Care segment manufactures, distributes and
sells over-the-counter health care products. Principal consumer
health care product categories and their respective products are:
analgesics including ADVIL; cough/cold/allergy remedies including
ROBITUSSIN and DIMETAPP; nutritional supplements including CENTRUM
products, CALTRATE and SOLGAR products; and hemorrhoidal, antacid
and asthma relief items. These products are generally sold to
wholesalers and retailers and are promoted primarily to consumers
worldwide through advertising. These products are manufactured in
the United States and Puerto Rico, and 16 foreign countries.
No single consumer health care product or category of products
accounted for more than 10% of consolidated net sales in 1999,
1998 or 1997.
AGRICULTURAL PRODUCTS SEGMENT
The Agricultural Products segment manufactures, distributes and
sells crop protection and pest control products. Principal
agricultural product categories and their respective products are:
herbicides including PURSUIT (marketed as PIVOT internationally),
and PROWL (marketed as STOMP internationally); insecticides
including COUNTER; and fungicides which are promoted to consumers
worldwide and generally sold directly to wholesalers and retailers.
In addition to the United States and Puerto Rico, these products
are manufactured in eight foreign countries.
On March 21, 2000, the Company announced that it signed a
definitive agreement with BASF for the sale of the Cyanamid
Agricultural Products business. (See Item 1. Business, General.)
No single agricultural product or category of products accounted
for more than 10% of consolidated net sales in 1999, 1998 or 1997.
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CORPORATE AND ALL OTHER SEGMENT
Corporate is responsible for the treasury, tax, legal and
compliance operations of the Company's businesses and incurs and
maintains certain assets, liabilities, expenses, gains and losses
related to the overall management of the Company which are not
allocated to the other reportable segments. These items include
gains on sales of investments and other corporate assets, interest
expense, net, the gain on the sale of the Sherwood-Davis & Geck
medical devices business, certain litigation provisions, including
the REDUX and PONDIMIN litigation charge (see Item 3. Legal
Proceedings), special charges, and other miscellaneous items. All
Other consists of the medical devices businesses which the Company
exited completely in February 1998. These businesses manufactured,
distributed and sold medical devices products, which included
needles and syringes, tubes, catheters, wound closure products,
ophthalmic surgical equipment, enteral feeding systems,
microsurgical equipment and other hospital products.
No single medical device product or category of products
accounted for more than 10% of consolidated net sales in 1998 or
1997.
Sources and Availability of Raw Materials
Generally, raw materials and packaging supplies are purchased in
the open market from various outside vendors. The loss of any one
source of supply would not have a material adverse effect on the
Company's future results of operations. However, finished dosage
forms of ENBREL are produced by one third-party manufacturer, and
raw materials for oral contraceptives, EFFEXOR and EFFEXOR XR are
sourced from sole third-party suppliers.
Patents and Trademarks
The Company owns, has applications pending for, and is licensed
under many patents relating to a wide variety of products. The
Company believes that its patents and licenses are important to its
business, but no one patent or license (or group of related patents
or licenses) currently is of material importance in relation to its
business as a whole.
In the U.S. pharmaceuticals business, many of the Company's major
products are not protected by patents. LODINE XL, a product
extension of LODINE, will have patent protection until at least
2007. ZIAC, a combination beta blocker and diuretic, will have
patent protection until at least 2000. SYNVISC, a visco
supplementation for treatment of osteoarthritis of the knee, will
have patent protection until at least 2010. The anti-infective
ZOSYN will have patent protection until at least 2007. The tumor
necrosis factor receptor (TNFR) ENBREL, will have patent protection
until at least 2014. The anti-depressant EFFEXOR will have patent
protection until at least 2007 and EFFEXOR XR will have patent
protection until at least 2017. PREMPRO, a combination estrogen
and progestin product, will have patent protection until at least
2015. BENEFIX Coagulation Factor IX (Recombinant), a blood
clotting factor for hemophilia B, will have patent protection until
2009 and RECOMBINATE, a concentrated recombinant human
antihemophilic factor (Factor VIII), a product that helps regulate
activation of the body's coagulation pathway, will have patent
protection until 2014.
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In 1999 and early 2000, the Company received market clearance for
several new pharmaceutical products including SONATA, REFACTO and
PREVNAR. SONATA, a non-benzodiazepine compound for the treatment of
insomnia in adults will have patent protection until at least 2008.
The albumin-free formulated recombinant factor VIII product for the
treatment of hemophilia A, REFACTO, will have patent protection
until at least 2014. PREVNAR, the Company's seven-valent
pneumococcal conjugate vaccine will have patent protection until
2004 and, patent extension under the Waxman-Hatch Act will be
applied for, extending this date until 2007.
Sales in the consumer health care business are largely supported by
the Company's trademarks and brand names. These trademarks and
brand names are a significant part of the Company's business and
have a perpetual life as long as they remain in use. See
"Competition" below for a discussion of generic and store brands
competition.
Seasonality
Sales and results of operations of the U.S. agricultural products
business are seasonal and tend to be heavily concentrated in the
first six months of each year. Sales of consumer health care
products are affected by seasonal demand for cough/cold products
and, as a result, second quarter results for consumer health care
products tend to be lower than results in other quarters.
Competition
PHARMACEUTICALS
The Company operates in the highly competitive pharmaceutical
industry which includes the human ethical pharmaceutical and animal
health businesses. Within these businesses, the Company has many
major multinational competitors and numerous smaller domestic and
foreign competitors. Based on net sales, the Company believes it
ranks within the top 10 major competitors within the human ethical
pharmaceutical industry and ranks within the top five major
competitors within the animal health industry.
The Company's competitive position is affected by several factors
including resources available to develop, enhance and promote
products, customer acceptance, product quality, patent protection,
development of alternative therapies by competitors, scientific and
technological advances, and governmental actions affecting pricing
and generic substitutes. In the United States, the growth of
managed care organizations, such as health maintenance
organizations and pharmaceutical benefit management companies, has
resulted in increased competitive pressures. The continued growth
of generic substitutes is further promoted by legislation,
regulation and various incentives enacted and promulgated in both
the public and private sectors.
PREMARIN, one of the Company's conjugated estrogens products
manufactured from pregnant mare's urine and which has not had
patent protection for many years, is the leader in its category and
contributes significantly to sales and results of operations.
PREMARIN's principal uses are to manage the symptoms of menopause
and to prevent osteoporosis, a condition involving a loss of bone
mass in postmenopausal women. Estrogen-containing products
manufactured by other companies have been marketed for many years
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for the treatment of menopausal symptoms, and some of these products
also have an approved indication for the prevention of
osteoporosis. During the past several years, other manufacturers
have introduced products for the treatment and/or prevention of
osteoporosis. Some companies have attempted to obtain approval for
generic versions of PREMARIN. These products, if approved, would
be routinely substitutable for PREMARIN under many state laws and
third-party insurance payer plans. In May 1997, the U.S. Food and
Drug Administration ("FDA") announced that it would not approve
certain synthetic estrogen products as generic equivalents of
PREMARIN given known compositional differences between the active
ingredient of these products and PREMARIN. Although the FDA has
not approved any generic equivalent to PREMARIN to date, PREMARIN
will continue to be subject to competition from existing and new
competing estrogen and other products for its approved indications
and may be subject to competition from either synthetic or natural
conjugated estrogens products in the future. At least one other
company has announced that it is in the process of developing a
generic version of PREMARIN from the same natural source, and the
Company currently cannot predict the timing or outcome of these or
any other efforts.
Health care costs will continue to be the subject of attention in
both the public and private sectors in the United States.
Similarly, health care spending, including pharmaceutical pricing,
is subject to increasing governmental review in international
markets. While the Company cannot predict the impact that any
future health care initiatives may have on the Company's worldwide
results of operations, the Company believes that the pharmaceutical
industry will continue to play a very positive role in helping to
contain global health care costs through the development of
innovative products.
CONSUMER HEALTH CARE
The consumer health care business has many competitors. Based on
net sales, the Company believes it ranks within the top five major
competitors within the consumer health care industry. The Company's
competitive position is affected by several factors including
resources available to develop, enhance and promote products,
customer acceptance, product quality, development of alternative
therapies by competitors, and scientific and technological advances.
The growth of generic and store brands continued to impact some of
the Company's consumer health care branded product line categories
in 1999 and is expected to continue during 2000.
AGRICULTURAL PRODUCTS
The Company operates in the highly competitive agrochemical
industry. The agricultural products business has over 40
competitors worldwide and ranks in the top 10 based on net sales.
Among these companies, the top 10 competitors are multinational,
representing over 85% of the sales in the agrochemical market.
Competitive factors include product efficacy, distribution channels
and resource availability for development of new products and
improvement of existing ones. There can also be generic competition
when products are no longer patent protected. Additionally, the
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rapid acceptance of genetically modified seed has generated
competition from agricultural products not traditionally used on
crops grown from conventional seed. This had an adverse effect on
the results of operations of the agricultural products segment for
the year ended 1999 and is expected to continue to have an adverse
effect in subsequent periods. In addition, depressed agricultural
commodity prices had an adverse effect and are expected to continue
to have an adverse effect on farmer demand for premium crop
protection products.
On March 21, 2000, the Company announced that it signed a
definitive agreement with BASF for the sale of the Cyanamid
Agricultural Products business. (See Item 1. Business, General.)
GENERAL
In all business segments, advertising and promotional expenditures
are significant costs to the Company and are necessary to
effectively communicate information concerning the Company's
products to health professionals, the trade and consumers.
Research and Development
Worldwide research and development activities are focused on
developing and bringing to market new products to treat and/or
prevent some of the most serious health care and agricultural
problems. Research and development expenditures totaled
approximately $1.740 billion in 1999, $1.655 billion in 1998, and
$1.558 billion in 1997 with approximately 87%, 84% and 80% of these
expenditures in the pharmaceutical area in 1999, 1998 and 1997,
respectively.
The Company currently has nine New Drug Applications and 22
Supplemental Drug Applications filed with the FDA for review, and
128 active Investigational New Drug Applications and two Biologics
License Applications pending. During 1999, several major
collaborative research and development arrangements were continued
with other pharmaceutical and biotechnology companies.
Additionally, the animal health business has 64 Veterinary Biologics
License Applications awaiting approval by the U.S. Department of
Agriculture ("USDA"), and the agricultural products business has 25
applications and the animal health business has one application for
new products and/or expanded use of existing products awaiting
approval by the U.S. Environmental Protection Agency ("EPA").
In 1999, FDA approval was granted for SONATA, a first in a new class
of non-benzodiazepine chemical compounds for the treatment of
insomnia in adults, and RAPAMUNE Oral Solution, the first in a new
class of immunosuppressive agents developed for the prevention of
organ rejection in kidney transplant patients. EFFEXOR XR,
approved for the treatment of depression in 1997, was approved in
1999 for a new indication, generalized anxiety disorder (GAD).
Also during 1999, the Company received marketing approval for
MENINGITEC by the United Kingdom ("U.K.") Medicines Control Agency
for the world's first conjugate vaccine against meningococcal Group
C disease, one of the primary causes of meningitis and septicemia
in children in the U.K. and other countries of the world.
Additionally, in 1999, the European Medicines Evaluation Agency
issued marketing authorization for REFACTO, the Company's
albumin-free formulated recombinant factor VIII product for the
treatment of hemophilia A, which received FDA approval in March
2000. In 1999, the Company also received EPA approval for BACKDRAFT
and EXTREME herbicides that are combinations of glyphosate and
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Cyanamid's imidazolinones for use on soybeans, and HABITAT
herbicide, a wildlife habitat management product.
Regulation
The Company's various health care and agricultural products are
subject to regulation by government agencies throughout the world.
The primary emphasis of these requirements is to assure the safety
and effectiveness of the Company's products. In the United States,
the FDA, under the Federal Food, Drug and Cosmetic Act and the
Public Health Service Act, regulates many of the Company's health
care products, including human and animal pharmaceuticals, vaccines,
consumer health care products and dietary supplements. The Federal
Trade Commission ("FTC") has the authority to regulate the promotion
and advertising of the consumer health care products including
over-the-counter drugs and dietary supplements. The USDA regulates
the Company's domestic animal vaccine products. The FDA's
enforcement powers include the imposition of criminal and civil
sanctions against companies, including seizures of regulated
products and criminal sanctions against individuals. The FDA's
enforcement powers also include its inspection of the numerous
facilities operated by the Company. To facilitate compliance, the
Company from time to time may institute voluntary compliance
actions such as product recalls when it believes it is appropriate
to do so. In addition, many states have similar regulatory
requirements. Most of the Company's pharmaceutical products, and
an increasing number of its consumer health care products, are
regulated under the FDA's new drug approval processes, which
mandate pre-market approval of all new drugs. Such processes
require extensive time, testing and documentation for approval,
resulting in significant costs for new product introductions. The
Company's U.S. pharmaceutical business is also affected by the
Controlled Substances Act, administered by the Drug Enforcement
Administration, which regulates strictly all narcotic and
habit-forming drug substances. In addition, in the foreign
countries where the Company does business, it is subject to
regulatory and legislative climates that, in many instances, are
similar to or more restrictive than that described above. The
Company devotes significant resources to dealing with the extensive
federal, state and local regulatory requirements applicable to its
products in the United States and internationally.
Federal law also requires drug manufacturers to pay rebates to
state Medicaid programs in order for their products to be eligible
for federal matching funds under the Social Security Act.
Additionally, a number of states are, or may be, pursuing similar
initiatives for rebates and other strategies to contain the cost of
pharmaceutical products. The federal Vaccines for Children
entitlement program enables states to purchase vaccines at federal
vaccine prices and limits federal vaccine price increases in certain
respects. Federal and state rebate programs are expected to
continue.
The manufacture and sale of pesticides in the U.S. are regulated by
the EPA. No new pesticide and no existing pesticide for a new use
may be manufactured, processed or used in the United States without
prior notice to or approval from, the EPA. Outside the United
States, agricultural chemicals are regulated by various agencies,
often by standards which differ from those in the United States.
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Environmental
Certain of the Company's operations are affected by a variety of
federal, state and local environmental protection laws and
regulations and the Company has, in a number of instances, been
notified of its potential responsibility relating to the generation,
storage, treatment and disposal of hazardous waste. In addition,
the Company has been advised that it may be a responsible party in
several sites on the National Priority List created by the
Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), commonly known as Superfund. (See Item 3. Legal
Proceedings.) In connection with the spin-off in 1993 by American
Cyanamid Company ("Cyanamid") of Cytec Industries Inc. ("Cytec"),
Cyanamid's former chemicals business, Cytec assumed the
environmental liabilities relating to the chemicals businesses,
except for the former chemical business site at Bound Brook, New
Jersey, and certain sites for which there is shared responsibility
between Cyanamid and Cytec. This assumption is not binding on
third parties, and if Cytec were unable to satisfy these
liabilities, they would, in the absence of other circumstances, be
enforceable against Cyanamid. The Company has no reason to believe
that it has any practical exposure to any of the liabilities
against which Cytec has agreed to assume and indemnify Cyanamid.
Additional information on environmental matters is set forth in
Notes 5 and 10 of the Notes to Consolidated Financial Statements in
the Company's 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Employees
At the end of 1999, the Company had 51,656 employees worldwide,
with 27,261 employed in the United States including Puerto Rico.
Approximately 26% of worldwide employees are represented by various
collective bargaining groups. Relations with most organized labor
groups remain relatively stable.
Financial Information about the Company's Domestic and Foreign
Operations
Financial information about U.S. and international operations for
the three years ended December 31, 1999 is set forth in Note 11 of
the Notes to Consolidated Financial Statements in the Company's
1999 Annual Report to Shareholders and is incorporated herein by
reference.
The Company's operations outside the United States are conducted
primarily through subsidiaries. International sales in 1999
amounted to 43% of the Company's total worldwide net sales.
The Company's international businesses are subject to risks of
currency fluctuations, governmental actions and other governmental
proceedings which are inherent in conducting business outside of the
United States. The Company does not regard these factors as
deterrents to maintaining or expanding its non-U.S. operations.
Additional information about international operations is set forth
under the caption "Liquidity, Financial Condition and Capital
Resources" in Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's 1999 Annual
Report to Shareholders and is incorporated herein by reference.
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ITEM 2. PROPERTIES
The Company's corporate headquarters and the headquarters of its
domestic consumer health care business are located in Madison, New
Jersey. The Company's domestic and international human ethical
pharmaceutical operations and its international consumer health care
business are headquartered in Radnor and St. Davids, Pennsylvania.
The Company's animal health business is headquartered in Overland
Park, Kansas. The agricultural products business maintains its
headquarters in Parsippany, New Jersey. The Company's foreign
subsidiaries and affiliates, which generally own their properties,
have manufacturing facilities in 23 countries outside the United
States.
The properties listed below are the principal manufacturing plants
(M) and research laboratories (R) of the Company as of December 31,
1999, listed in alphabetical order by state or country. All of
these properties are owned except certain facilities in Cambridge,
Massachusetts, Cherry Hill, New Jersey, Guayama, Puerto Rico and
Suzhou, China which are under lease. The Company also owns or
leases a number of other smaller properties worldwide which are
used for manufacturing, research, warehousing and office space.
Pharmaceuticals and Consumer Health Care:
United States:
Charles City, Iowa (M)
Fort Dodge, Iowa (M, R)
Andover, Massachusetts (M, R)
Cambridge, Massachusetts (R)
Cherry Hill, New Jersey (M, R)
Princeton, New Jersey (R)
Chazy, New York (R)
Pearl River, New York (M, R)
Rouses Point, New York (M, R)
Sanford, North Carolina (M)
Marietta, Pennsylvania (M, R)
Radnor, Pennsylvania (R)
West Chester, Pennsylvania (M)
Carolina, Puerto Rico (M)
Guayama, Puerto Rico (M)
Richmond, Virginia (M, R)
International:
St. Laurent, Canada (M, R)
Suzhou, China (M)
Havant, England (M, R)
Askeaton, Ireland (M, R)
Newbridge, Ireland (M)
Catania, Italy (M, R)
Weesp, Netherlands (M)
Cabuyao, Philippines (M)
Gerona, Spain (M, R)
Hsin-Chu Hsien, Taiwan (M)
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All of the above facilities are exclusively pharmaceuticals
facilities except for Pearl River, New York, Rouses Point, New York,
Guayama, Puerto Rico, Richmond, Virginia, St. Laurent, Canada,
Suzhou, China, Havant, England, Newbridge, Ireland and Hsin-Chu
Hsien, Taiwan which are both pharmaceuticals and consumer health
care facilities.
Agricultural Products:
United States:
Hannibal, Missouri (M)
Princeton, New Jersey (R)
International:
Paulinia, Brazil (M)
Resende, Brazil (M)
Genay, France (M)
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to numerous lawsuits
and claims arising out of the conduct of its business, including
product liability and other tort claims.
On September 15, 1997, the Company's Wyeth-Ayerst Laboratories
division, the manufacturer of PONDIMIN (fenfluramine) and the
distributor of REDUX (dexfenfluramine), announced a voluntary and
immediate withdrawal of these antiobesity products. The Company
took this action on the basis of new, preliminary information
provided to the Company on September 12, 1997 by the FDA regarding
heart valve abnormalities in patients using these products. The
Company estimates that approximately 6 million people used these
products in the United States.
On October 7, 1999, the Company announced a comprehensive, national
settlement to resolve litigation brought against the Company
regarding the use of REDUX or PONDIMIN. This nationwide, class
action settlement is open to all REDUX or PONDIMIN users in the
United States, regardless of whether they have lawsuits pending, and
offers a range of benefits depending on a participant's particular
circumstances, including a refund program for the cost of the drugs;
medical screening; additional medical services or cash payments; and
compensation in the event of serious heart valve problems. The
settlement terms are reflected in a settlement agreement executed
on November 19, 1999 (In Re Diet Drugs Products Liability
Litigation, MDL No. 1203; Brown, et al. v. American Home Products
Corporation, No. 99-20593). The settlement covers all claims
arising out of the use of REDUX or PONDIMIN except for claims of
Primary Pulmonary Hypertension ("PPH"). The settlement provides
opportunities during three different time periods for claimants to
opt out of the settlement. Under certain circumstances, the Company
will receive credits for future settlement payments to claimants who
opt out of the settlement. The Company may terminate the settlement
at its discretion based on the number of initial opt outs. The
initial opt out period ends March 30, 2000. The settlement states
I-11
that it shall not be construed to be an admission or evidence of any
liability or wrongdoing whatsoever by the Company or the truth of
any of the claims alleged.
On November 23, 1999, U.S. District Judge Louis C. Bechtle, the
judge overseeing the federal MDL litigation in Philadelphia, granted
preliminary approval of the settlement and directed that notice of
the settlement terms be provided to class members. The notice
program began in December 1999. Judge Bechtle has scheduled a
fairness hearing to take place in Philadelphia beginning on May 1,
2000.
Payments by the Company into the settlement funds will continue for
approximately 16 years after final judicial approval, if needed, to
provide settlement benefits to members of the class. Payments to
the settlement funds in 1999 were $75 million with approximately
$1.78 billion to be paid over approximately the next two years
(approximately $1.0 billion of which is subject to final judicial
approval). A charge of $4.75 billion has been recorded to provide
for expected payments to the settlement funds, other judgments and
settlements (including claims for PPH and opt outs), and future
legal costs, net of available insurance.
As of March 27, 2000, the Company has been served or is aware that
it has been named as a defendant in 9,456 lawsuits as the
manufacturer of PONDIMIN and/or the distributor of REDUX. These
lawsuits have been filed on behalf of individuals who claim to have
been injured as a result of their use of PONDIMIN and/or REDUX,
either individually or in combination with the prescription drug
phentermine (which the Company does not manufacture, distribute or
market). The lawsuits also often name as defendants other
distributors and/or retailers of PONDIMIN and/or REDUX, the
manufacturers, distributors and/or retailers of phentermine, and
physicians or other health care providers. The Company anticipates
that it will be named as a defendant in an unknown number of
additional PONDIMIN and/or REDUX lawsuits in the future.
Of the 9,456 lawsuits naming the Company as a defendant, 114 are
actions that seek certification of a class, some on a national and
others on a statewide basis. Of these 114 lawsuits, 47 are pending
in various federal district courts and 67 are pending in various
state courts. A number of the actions brought in state courts have
been removed to federal courts. Individual plaintiffs have filed
the remaining lawsuits: 1,725 such lawsuits are pending in
various federal district courts and 7,617 such lawsuits are
pending in various state courts. The 9,456 lawsuits contain a
total of 18,550 plaintiffs (not including spouse or consortium
claims). On December 10, 1997, the federal Judicial Panel on
Multidistrict Litigation transferred all pending federal lawsuits
alleging injuries from the use of REDUX and/or PONDIMIN to the U.S.
District Court for the Eastern District of Pennsylvania, where they
have been coordinated for all pretrial purposes. The state cases
are pending in 51 different states or jurisdictions, with the bulk
of the cases in Alabama, California, Florida, Nevada, New Jersey,
New York, Pennsylvania, Texas and Utah.
Plaintiffs' allegations of liability are based on various theories
of recovery, including, but not limited to, product liability,
strict liability, negligence, various breaches of warranty,
conspiracy, fraud, misrepresentation and deceit. These lawsuits
typically allege that the short or long-term use of PONDIMIN and/or
REDUX, independently or in combination (including the combination of
PONDIMIN and phentermine popularly known as "fen/phen"), causes,
among other things, PPH, valvular heart disease and/or neurological
dysfunctions. In addition, some lawsuits allege severe emotional
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distress caused by the knowledge that ingestion of these drugs,
independently or in combination, could cause such injuries.
Plaintiffs typically seek relief in the form of monetary damages
(including general damages, medical care and monitoring expenses,
loss of earnings and earnings capacity, compensatory damages and
punitive damages), generally in unspecified amounts, on behalf of
the individual or the class. In addition, some actions seeking
class certification ask for certain types of purportedly equitable
relief, including, but not limited to, declaratory judgments and the
establishment of a research or medical surveillance program.
Motions to certify a class of state residents who used REDUX or
PONDIMIN and who are seeking medical monitoring or surveillance for
possible injuries (or compensation for medical screening already
performed) have been granted in Illinois (Rhyne, et al. v. AHPC, et
al., Circuit Court, Chancery Division, Cook Cty., No. 98-CH-04099);
Montana (Lamping, et al. v. American Home Products, Inc., et al.,
Fourth Judicial District Court, Missoula Cty., No. DV-97-85786);
New Jersey (Vadino, et al. v. AHPC, et al., Superior Court,
Middlesex Cty., No. MID-L-425-98); New York (In re: New York Diet
Drug Litigation; Cunningham, et al. v. American Home Products
Corporation, et al., Sup. Ct., New York Cty., Nos. 70000/98,
401962/98); Pennsylvania (In re: Pennsylvania Diet Drugs Litigation,
Court of Common Pleas, Philadelphia Cty., No. 9709-3162); Texas
(Earthman, et al. v. AHPC, District Court, Montgomery Cty., No.
97-10-03790-CV); Washington (St. John, et al. v. AHPC, et al.,
Superior Court, Spokane Cty., No. 97-2-06368-4); and West Virginia
(Burch, et al. v. AHPC, et al., Circuit Court, Brooke Cty., No.
97-C-204 (1-11)). In Kentucky, one court has certified a medical
monitoring class for all Kentucky residents who were patients of a
particular Kentucky weight loss clinic (Guard, et al. v. A.H. Robins
Co., Inc., et al., Boone Circuit Court, No. 98-CI-795) and another
has certified, on an ex parte basis, a statewide medical monitoring
class (Feltner, et al. v. AHPC, et al., Leslie Circuit Court, No.
99-CI-00127), notwithstanding a recent opinion by a third court that
a medical monitoring cause of action does not exist under Kentucky
law (Wood, et al. v. AHPC, et al., Jefferson Circuit Court, No.
97-CI-5873, June 23, 1999). On August 26, 1999, Judge Bechtle
granted conditional class certification of an MDL medical
monitoring class comprising individuals who used either of the diet
drugs for 30 days or more and who (a) do not have a present lawsuit
alleging personal injury, (b) do not live in one of the states
where a statewide medical monitoring class has already been
certified, and (c) are not asymptomatic residents of states which
require actual injury to pursue a medical monitoring claim.
(Jeffers, et al. v. American Home Products Corporation, No.
98-20626, U.S.D.C., E.D. Pa.).
Claims for medical monitoring have also been dismissed or denied
class certification in several states. In Florida, the trial court
dismissed plaintiffs' claims for medical monitoring on the grounds
that no such cause of action exists under Florida law (Petito, et
al. v. A.H. Robins Company, Inc., et al., Circuit Court, Dade Cty.,
No. 97-26031 CA 21), although that decision was recently reversed
by an intermediate appellate court and the Company is now seeking
review by the Florida Supreme Court. The New Mexico District Court
has dismissed a proposed statewide medical monitoring class action
lawsuit in that state on the grounds that there is no cause of
action for medical monitoring under New Mexico law without physical
injury (Sandoval, et al. v. Wyeth-Ayerst Laboratories Division of
American Home Products Corporation, No. D0101-CV-9802295, First
Jud. Dist., Santa Fe Cty., NM). In California, the court
overseeing the California diet drug litigation has denied class
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certification in the proposed California medical monitoring action
on the grounds that common issues do not predominate over the many
individual issues (In re: Diet Drug Cases, No. JCCP 004032, Dep't
SE D, Super. Ct., CA). In Arkansas, a proposed class seeking
damages for personal injuries as well as monitoring was denied
certification because of the myriad individual medical and legal
issues presented by the plaintiffs' claims (Baker, et al. v.
Wyeth-Ayerst Laboratories Division, a Division of American Home
Products Corporation, et al., Circuit Court, Washington Cty., No.
CIV 97-1192). That decision has been affirmed by the Arkansas
Supreme Court. Class certification has also been denied in Iowa
(Luce, et al. v. Gate Pharmaceuticals, et al., No. CE 35476, Dist.
Ct., Polk Cty.). In Iowa, the court found that a cause of action
for medical monitoring existed under Iowa law, but only where the
exposure to the harmful substance is probable and the injury is
latent. The court denied certification of the medical monitoring
class on the ground that there was no evidence that the injuries
alleged by the diet drug plaintiffs were latent.
On August 6, 1999, the jury hearing the case of Lovett v.
Wyeth-Ayerst Laboratories Division of American Home Products Corp.,
et al. (294th Jud. Dist. Ct., Van Zandt Cty., TX) returned a
verdict in favor of the plaintiff and against the Company for
$3.3 million in compensatory damages and $20 million in punitive
damages. In September 1999, prior to consideration of the
Company's post-trial motions to reduce the award or overturn the
verdict, the Lovett case was settled for less than 10% of the
amounts awarded in the verdict.
In New Jersey, trial of the statewide medical monitoring class
action which had begun on August 11, 1999 (Vadino, et al. v. AHPC,
et al., Superior Court, Middlesex Cty., No. MID-L-425-98) has been
stayed pending finalization of the national settlement.
On December 22, 1999, a jury in Fayette, Mississippi hearing the
claims of five plaintiffs in the case of Washington v. AHPC returned
a verdict of $150 million in compensatory damages. Prior to the
jury's deliberation on plaintiffs' claims for punitive damages, the
Company and plaintiffs' counsel reached an agreement to settle the
cases of these five plaintiffs and virtually all of the diet drug
cases then pending in state court in Mississippi for an undisclosed
amount. The Mississippi court thereupon entered judgment for the
Company notwithstanding the verdict on compensatory damages and
directed a verdict in the Company's favor on punitive damages.
The Company is also named as a defendant in two shareholder
lawsuits arising out of the REDUX and PONDIMIN withdrawal. Oran,
et al. v. Stafford, et al. (No. 97-CV-4513 (NHP), U.S.D.C., D.N.J.)
is a securities fraud putative class action in which plaintiffs
allege, on behalf of a class of individuals who purchased shares of
AHPC stock on the open market during the period from March 1, 1997
through September 16, 1997, that the Company (and nine officers and
directors named as controlling persons under Section 20(a) of the
Securities Exchange Act of 1934) engaged in a plan to defraud the
market and purchasers of AHPC stock in violation of Section 10(b) of
the Exchange Act and SEC Rule 10b-5 by failing to disclose material
facts or making material misstatements of fact regarding alleged
adverse events associated with REDUX and PONDIMIN, in particular the
alleged association between those two products and valvular heart
disease. Plaintiffs' amended complaint also includes claims for
negligent misrepresentation and common law fraud and deceit.
Plaintiffs seek compensatory damages for themselves and for the
class. On February 5, 1999, the Oran case was dismissed with
I-14
prejudice by the U.S. District Court for the District of New Jersey.
Plaintiffs have appealed the decision to the U.S. Court of Appeals
for the Third Circuit. Grill v. Stafford, et al., (No. MRS-L-164-
98, N.J. Sup. Ct., Morris Cty.) is a shareholder derivative action
filed against the Company, the directors and certain officers which
seeks to recover any losses or damages sustained by the Company as
a result of alleged intentional, reckless or negligent breaches of
fiduciary duty by the directors and officers. The complaint alleges
that the directors and officers were aware of the propensity of
REDUX and/or PONDIMIN to cause serious heart valve damage and failed
to disclose that fact, exposing the Company to liability for
personal injury lawsuits and securities claims. The Grill action
has been stayed pending the outcome of the Oran appeal.
The Company believes that it has meritorious defenses to these
actions and that it has acted properly at all times in dealing with
REDUX and PONDIMIN matters. The Company intends to defend all of
the remaining REDUX and PONDIMIN litigation vigorously.
At December 31, 1999, there were 3,697 lawsuits, filed on behalf of
41,124 plaintiffs, against the Company or its Wyeth-Ayerst
Laboratories division alleging injuries as a result of use of the
NORPLANT SYSTEM, the Company's implantable contraceptive containing
levonorgestrel. The majority of the NORPLANT SYSTEM lawsuits,
representing approximately 3/4 of the plaintiffs, have been filed in
federal courts and have been consolidated before Judge Richard
Schell in the U.S. District Court for the Eastern District of Texas.
The remainder of the lawsuits are pending in state courts.
In September 1999, the Company announced that it had reached an
agreement with plaintiffs' counsel, representing virtually all of
the plaintiffs with lawsuits pending against the Company, to settle
the NORPLANT SYSTEM lawsuits for $1,500 per claimant. That
settlement proposal has been communicated by plaintiffs' attorneys
to their clients with a recommendation that they accept the offer.
The agreement to recommend settlement will not cover plaintiffs who
allege that they experienced either idiopathic intracranial
hypertension or stroke. The cost of the settlement is anticipated
to be approximately $50 million. As of March 27, 2000, releases had
been received from 30,105 plaintiffs pursuant to the settlement
program. The Company anticipates that its insurance coverage will
be sufficient to cover the cost of the settlement and any remaining
NORPLANT SYSTEM litigation. The Company will continue to contest
any remaining NORPLANT SYSTEM litigation vigorously.
Two putative personal injury class actions have been filed in
Louisiana in connection with the Company's voluntary market
withdrawal of DURACT, its non-narcotic analgesic pain reliever.
Chimento, et al. v. Wyeth-Ayerst Laboratories Company, et al., filed
in the District Court of Louisiana for the Parish of St. Bernard,
and Martin, et al. v. Wyeth-Ayerst Laboratories, et al., filed in
the District Court of Louisiana for Orleans Parish, each seek the
certification of a class of Louisiana residents who were exposed to
and who suffered injury from DURACT. Plaintiffs in both cases seek
compensatory and punitive damages, the refund of all purchase costs,
and the creation of a court-supervised medical monitoring program
for the diagnosis and treatment of liver damage and related
conditions allegedly caused by DURACT. A putative nationwide class
action, McGloin v. Wyeth-Ayerst Laboratories Division of American
Home Products Corporation, filed in the U.S. District Court for the
Northern District of California (No. C-98-2596-CW), has been
I-15
dismissed. Additionally, there are 25 individual lawsuits involving
37 former DURACT users. They allege myriad injuries, from
gastrointestinal upset and distress to liver transplant and death.
The Company intends to defend the DURACT litigation vigorously.
The Company has been named as a defendant in ten lawsuits in which
plaintiffs purport to represent a statewide class of health care
workers who have been injured by needle and syringe devices
manufactured by the Company's former Sherwood-Davis & Geck
("Sherwood") subsidiary. The complaints have been filed in Alabama,
California, Florida, New Jersey, New York, Ohio, Oklahoma,
Pennsylvania, Texas and South Carolina and contain virtually
identical allegations. The cases that had been pending in
California, Florida, Ohio and New Jersey have been dismissed as to
Sherwood. Six cases remain pending. (Daniels v. AHPC, et al.,
No.2757-G, Circ. Ct., Montgomery Cty., AL; Benner v. Becton
Dickinson and Co., et al., No. 99 Civ. 4785 (JGK) U.S.D.C.,
S.D.N.Y; Palmer v. AHPC, et al., No. CJ-98-685, Dist. Ct., Sequoyah
Cty., OK; Brown v. AHPC, et al., No. 03474, Ct. Comm. Pleas,
Philadelphia Cty., PA; Calvin v. AHPC, et al., No. 342-173329-98,
Dist. Ct., Tarrant Cty., TX; Bales v. AHPC, et al., No. 98-CP-
40-4343, Ct. Comm. Pleas, Richland Cty., SC). Each lawsuit names
AHPC, Becton Dickinson and Company ("BD"), Sherwood's largest
competitor, and Tyco International (U.S.) Inc. ("Tyco"), Sherwood's
current corporate owner, as well as several distributors of medical
devices. The complaints allege that the needle and syringe devices
designed and manufactured by Sherwood are defective in that they
expose health care workers to the risk of accidental needlesticks
and the resultant possibility of acquiring blood-borne diseases.
Each named plaintiff seeks to represent a statewide class of
health care workers who have sustained a "contaminated" needlestick;
reported the incident to their employer and tested negative for
a blood-borne disease. The complaints seek recovery for the costs
of treating the needlesticks. The Company is being defended and
indemnified in each of these cases by Tyco with respect to injuries
alleged to have occurred after February 27, 1998, the date of the
closing of the sale of Sherwood to Tyco. The Company remains
responsible for injuries occurring prior to that date and is
defending and indemnifying Tyco for those injuries. On January 13,
2000, the court in the Calvin matter conditionally certified a
class. The class consists of all Texas health care workers who,
between April 9, 1998 and January 13, 2000, were stuck with a
Sherwood or BD standard (non-safety) needle or blood collection
device, after the needle was withdrawn from a patient, and who
reported the needlestick. Health care workers who were stuck with a
needle used on a patient who was infected by a blood-borne pathogen
are specifically excluded from the class. The defendants have
appealed the class certification order to the Texas Supreme Court.
Discovery in the remaining cases remains dormant pending resolution
of the Texas appeal. The Company will defend the needlestick
litigation vigorously.
A purported class action has been filed in the Pennsylvania Court of
Common Pleas, Delaware County, on behalf of a proposed class
consisting of all persons in the Commonwealth of Pennsylvania who
have been administered and who paid for, in whole or in part, the
Company's ROTASHIELD vaccine. (Lennon, et al. v. Wyeth-Ayerst
Laboratories, et al., No. 99-13101). The complaint alleges, inter
alia, breach of contract, breach of warranty, unjust enrichment and
violation of the Pennsylvania Unfair Trade Practices Act and seeks
minimum damages of $100 per class member plus treble damages and
attorneys' fees. The Company intends to defend the case vigorously.
I-16
On July 7, 1997, plaintiffs were awarded $44 million in compensatory
damages and $1 million in punitive damages in an action which was
commenced in U.S. District Court in August 1993 (University of
Colorado et al. v. American Cyanamid Company, Docket No. 93-K-1657,
D.Col.). The plaintiffs had accused Cyanamid of misappropriating
the invention of, and patenting as its own, the formula for the
current MATERNA Multi-Vitamins. The complaint also contained
allegations of conversion, fraud, misappropriation, wrongful naming
of inventor, and copyright and patent infringement. The patent,
whose ownership and inventorship is in dispute, was granted to
Cyanamid in 1984. The Court had previously granted Cyanamid's
summary judgment motions dismissing all counts for relief except for
unjust enrichment and fraud, which were the issues tried before the
court in a three-week bench trial in May 1996. Although the
plaintiffs had earlier been granted summary judgment of their
copyright infringement claim, the court declined to award
plaintiffs damages on that claim. Plaintiffs' post-trial motions
seeking to increase the damages to approximately $111 million
(allegedly representing Cyanamid's gross profit for 1982-1985 from
the sale of the reformulated MATERNA product) and to recover
approximately $800,000 of attorneys fees was denied. In
November 1999, the Court of Appeals affirmed in part and vacated in
part the District Court's judgment, and remanded this case to the
District Court for further proceedings. Under this ruling, the
$45 million judgment against the Company was vacated.
On October 14, 1993, Rite Aid Corporation, Revco D.S. Inc., and
other retail drug chains and retail pharmacies filed an action in
U.S. District Court (M.D. Pa.) against the Company, other
pharmaceutical manufacturers and a pharmacy benefit management
company alleging that the Company and other defendants provided
discriminatory price and promotional allowances to managed care
organizations and others in violation of the Robinson-Patman Act.
The complaint further alleged collusive conduct among the defendants
related to the alleged discriminatory pricing in violation of the
Sherman Antitrust Act as well as certain other violations of common
law principles of unfair competition.
Subsequently, numerous other cases, many of which were purported
class actions brought on behalf of retail pharmacies and retail
drug and grocery chains, were filed in various federal courts
against the Company as well as other pharmaceutical manufacturers
and wholesalers. These cases made one or more similar allegations
of violations of federal or state antitrust or unfair competition
laws. In addition, a mail order pharmacy plaintiff alleged that it
was forced out of business and certain plaintiffs also alleged that
the defendants' patents covering brand name prescription drugs give
the defendants power to enter into exclusionary arrangements with
certain managed care customers and sought compulsory patent
licenses. The various class actions were consolidated as a single
class action (the "Consolidated Class Action") which alleged
violations of Section 1 of the Sherman Act. All of the federal
actions have been coordinated and consolidated for pretrial purposes
under the caption In re Brand Name Prescription Drugs Antitrust
Litigation (MDL 997 N.D. Ill.). These federal actions sought treble
damages in unspecified amounts and injunctive and other relief.
I-17
In June 1996, the court in the federal actions approved an amended
settlement among certain defendants, including the Company, and the
Consolidated Class Action plaintiffs. The settlement provided,
among other things, for certain payments to be made by the settling
defendants, over a period of three years, to the Consolidated Class
Action plaintiffs. The Company's settlement payments (including
payments to be made on behalf of Cyanamid) total $42.5 million.
Certain provisions of the amended settlement, which became effective
on January 28, 1998 and will be in effect for three years, prohibit
the settling manufacturers from refusing to grant discounts to
retailers solely because of their status as retailers and require
that retailers be given the opportunity to demonstrate their ability
to move market share and to negotiate and earn discounts similar to
any discounts offered to managed care organizations. The terms of
the settlement also provide that it shall not be deemed or
construed to be an admission or evidence of any violation of any
statute or law or of any liability or wrongdoing by the Company or
of the truth of any of the claims or allegations alleged in the
Consolidated Class Action.
In January 1999, after a trial on the merits involving
manufacturers and wholesalers that had not previously settled the
Consolidated Class Action case, the federal district court granted
a directed verdict to the defendants in that case. The U.S. Court
of Appeals for the Seventh Circuit reaffirmed the directed verdict
in favor of defendants on the conspiracy allegations, except with
respect to the allegation of a conspiracy relating to
manufacturers' efforts to comply with government requests to limit
price increases to the increase in the Consumer Price Index ("CPI").
After remand of the case, the federal district court granted summary
judgment to the defendant manufacturers on the CPI issue.
The Company has also settled the following cases brought by
retailers that opted out of the Consolidated Class Action:
Albertson's, Inc., et al. v. Abbott Labs., et al. (Docket No.
94-C-3669, S.D. Ohio); American Drug Stores, Inc. v. Abbott Labs.,
et al. (Docket No. 97-C-8076, N.D. Ill.); Eckerd Corp. v. Abbott
Labs., et al. (Docket No. 97-C-8075, N.D. Ill.); and two groups of
cases brought by retail pharmacies, one involving five complaints
with multiple plaintiffs and the other involving 113 complaints
with multiple plaintiffs. The Company has also settled a group of
cases brought by various retail pharmacies that had opted out of the
federal class action. (Marc Glassman, Inv. v. Abbott Labs. (N.D.
Ohio)). The terms of the settlements, which are not material
to the Company, provide that they shall not be deemed to be an
admission of or evidence of any violation of any statute or law or
of any liability or wrongdoing by the Company. The remaining
individual actions in MDL 997, including those brought by Rite Aid
Corporation, Revco D.S. Inc., and certain other retailers, continue
to be pending against the Company.
In 1997, the Consolidated Class Action plaintiffs also filed a
complaint against the defendants that settled the Consolidated Class
Action, including the Company. The class action plaintiffs allege
that the settling defendants conspired to not implement the
affirmative obligations in the settlement agreements which were
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before the Seventh Circuit Court of Appeals and not yet final at
that time. The complaint seeks class action status and requests
preliminary and permanent injunctions. It does not request money
damages. The request for a preliminary injunction was denied.
In addition to the federal actions, similar litigation on behalf of
consumers or retail pharmacies has been brought in various state
courts, including purported class actions in Alabama, Arizona,
California, Colorado, District of Columbia, Florida, Kansas, Maine,
Michigan, Minnesota, Mississippi, New Mexico, New York, North
Carolina, North Dakota, South Dakota, Tennessee, Washington, West
Virginia and Wisconsin. The Company and other defendants have
settled the actions in Arizona, California, District of Columbia,
Florida, Kansas, Maine, Michigan, Minnesota, New York, North
Carolina, Tennessee and Wisconsin. The Company and other defendants
have also settled a purported class action with similar allegations
under state antitrust, unfair competition and unitary pricing laws
in Wisconsin state court on behalf of retail pharmacies located in
that state. The actions in Colorado and Washington were dismissed
on pre-trial motions. In Alabama, the Supreme Court held that
Alabama state antitrust law did not apply to primarily interstate
agreements. The defendants have moved to dismiss all of the claims
filed under Alabama antitrust law.
The cases currently remaining against the Company in the brand name
prescription drugs litigation are: a second consumer case filed in
Tennessee and the consumer cases in New Mexico, North Dakota, South
Dakota and West Virginia; a California case involving certain
retail pharmacies; a Mississippi case on behalf of two pharmacies;
and cases brought by the Rite Aid Pharmacy chain and certain other
pharmacies.
Additionally, the FTC has been investigating allegations of
concerted action in the pricing of pharmaceutical products and the
Company has provided information in response to a subpoena.
In an action commenced in state court in Texas in January 1997 by
Avatex Corporation (formerly FoxMeyer Health Corporation) against
McKesson Corp., the Company's Wyeth-Ayerst Laboratories Division and
eleven other manufacturers, which was removed to U.S. District
Court of the Northern District of Texas (Civil Action No.
3:99-CV-0010-L) and referred to U.S. Bankruptcy Court in
Dallas, Texas (Adv. No. 397-3052, U.S.B.C., N.D. Tex.), Avatex is
seeking in excess of $400 million in compensatory damages alleged to
have risen from an alleged conspiracy to drive Avatex's subsidiary
into bankruptcy, ostensibly so that McKesson could then purchase the
drug distribution operations of the subsidiary at a discounted
price. Avatex has conceded that the counts alleging violation of
the antitrust laws and unfair competition are property of the
debtor's estate. The Bankruptcy Trustee has agreed to dismiss any
claims against the Company that belong to the debtor's estate. The
plaintiff's conspiracy counts were dismissed, but that dismissal has
been appealed by Avatex.
Plaintiffs in a purported class action commenced in 1997 in state
court in Tennessee, Fox v. American Cyanamid Company (No. 19,996,
Ch. Ct. Tenn.) alleged violations of state antitrust and consumer
protection laws by Cyanamid concerning pricing practices relating to
marketing programs for crop protection products. The action
I-19
purported to be on behalf of indirect purchasers of Cyanamid's crop
protection products in the states of Tennessee, Alabama, California,
Florida, Kansas, Maine, Michigan, Minnesota, Mississippi, New
Mexico, North Carolina, North Dakota, South Dakota, West Virginia,
Wisconsin and the District of Columbia. An agreement to settle the
case for $5.2 million was initially approved by the court but was
subsequently set aside. Cyanamid is seeking to appeal the decision
setting aside the settlement. Plaintiffs have filed an amended
complaint on behalf of a purported class of indirect purchasers in
Tennessee and Kansas only.
A purported class action in federal court in Alabama, Lowell v.
American Cyanamid Company (No. 97-581-BH-M, U.S.D.C., S.D. Ala.)
alleges violations of federal antitrust laws involving pricing
practices relating to marketing programs for crop protection
products. This action was dismissed but the U.S. Court of Appeals
for the 11th Circuit reversed the dismissal and plaintiffs then
filed an amended complaint with similar allegations.
The FTC has initiated an investigation of possible anticompetitive
effects of the settlement of a patent litigation between Schering-
Plough and ESI Lederle relating to ESI Lederle's generic version of
Schering-Plough's long acting potassium chloride product. The
Company has responded to a subpoena issued by the FTC.
In 1999, the Brazilian Administrative Council for Economic Defense
("CADE") and other government bodies initiated investigations of
Laboratories Wyeth-Whitehall Ltda. and other pharmaceutical
companies concerning possible violation of Brazilian competition
laws. CADE alleges that the companies 1) sought to establish
uniform commercial policies regarding wholesalers and 2) refused to
sell product to wholesalers that distribute generic products
manufactured by certain Brazilian pharmaceutical companies. The
Company is providing information to CADE and other government
bodies.
In 1999, an application from certain drug wholesalers alleging that
the Company and certain other pharmaceutical manufacturers violated
South Africa's competition law by using a distributor jointly owned
by the manufacturers, resulted in an investigation by the
Competition Tribunal in South Africa regarding this matter. The
Company is cooperating with the Competition Tribunal and has
provided information in this regard.
As discussed in Item I, the Company is a party to, or otherwise
involved in, legal proceedings under CERCLA and similar state laws
directed at the cleanup of various sites including 57 Superfund
sites, including the Cyanamid-owned Bound Brook, N.J. site. The
Company's potential liability varies greatly from site to site. For
some sites, the potential liability is de minimis and, for others,
the final costs of cleanup have not yet been determined. As
assessments and cleanups proceed, these liabilities are reviewed
periodically and are adjusted as additional information becomes
available. Environmental liabilities are inherently unpredictable.
The liabilities can change substantially due to such factors as
additional information on the nature or extent of contamination,
methods of remediation required and other actions by governmental
agencies or private parties. The 57 Superfund sites exclude sites
for which Cytec assumed full liability and agreed to indemnify
Cyanamid but include certain sites for which there is shared
responsibility between Cyanamid and Cytec. The Company has no
I-20
reason to believe that it has any practical exposure to any of the
liabilities against which Cytec has agreed to assume and indemnify
Cyanamid.
In the opinion of the Company, although the outcome of any
litigation cannot be predicted with certainty, the ultimate
liability of the Company in connection with pending litigation and
other matters described above will not have a material adverse
effect on the Company's financial position but could be material to
the results of operations in any one accounting period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
I-21
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 29, 2000
Each officer is elected to hold office until a successor is chosen or until
earlier removal or resignation. None of the executive officers is related to
another:
Elected to
Name Age Offices and Positions Office
John R. Stafford 62 Chairman of the Board, December 1986
President and Chief
Executive Officer
Chairman of
Executive, Finance,
Operations, Nominating
and Retirement Committees
Business Experience: 1991 to date, Chairman
of the Board, President and
Chief Executive Officer
(President to May 1990 and
from February 1994)
Robert Essner 52 Executive Vice President September 1997
Director, Member of Finance,
Operations and Retirement
Committees
Business Experience: To March 1997, President,
Wyeth-Ayerst Laboratories,
U.S. Pharmaceuticals Business
March 1997 to September 1997,
President, Wyeth-Ayerst
Global Pharmaceuticals
September 1997 to date,
Executive Vice President
Joseph J. Carr 57 Senior Vice President May 1993
Member of Finance and
Operations Committees
Business Experience: To May 1993, Group Vice
President
May 1993 to date,
Senior Vice President
I-22
Elected to
Name Age Offices and Positions Office
John R. Considine 49 Senior Vice President February 2000
- Finance
Member of Finance, Operations
and Retirement Committees
Business Experience: 1992 to January 2000, Vice
President - Finance
February 2000 to date, Senior
Vice President - Finance
Louis L. Hoynes, Jr. 64 Senior Vice President and November 1990
General Counsel
Member of Finance, Operations
and Retirement Committees
Business Experience: 1991 to date, Senior Vice
President and General
Counsel
Robert I. Levy, M.D. 62 Senior Vice President March 1998
- Science and Technology
Member of Finance and
Operations Committees
Business Experience: To March 1998, President,
Wyeth-Ayerst Research
March 1998 to date, Senior Vice
President - Science and
Technology
I-23
Elected to
Name Age Offices and Positions Office
Kenneth J. Martin 46 Senior Vice President and February 2000
Chief Financial Officer
Member of Finance, Operations
and Retirement Committees
Business Experience: August 1995 To October 1996
President, American Home Foods
November 1996 To February 1997
President, International Home
Foods, Inc.
February 1997 To March 1997
Executive Vice President,
Wyeth-Ayerst Pharmaceuticals
March 1997 To September 1998
President, Whitehall-Robins
October 1998 To January 2000
Senior Vice President
and Chief Financial Officer,
Wyeth-Ayerst Pharmaceuticals
February 2000 to date, Senior
Vice President and Chief
Financial Officer
William J. Murray 54 Senior Vice President October 1995
Member of Finance and
Operations Committees
Business Experience: To January 1995, Group Vice
President, American Cyanamid
Company
January 1995 to October 1995,
Vice President
October 1995 to date, Senior
Vice President
David M. Olivier 56 Senior Vice President January 1996
Member of Finance and
Operations Committees
Business Experience: To January 1996, President,
Wyeth-Ayerst International,
Inc.
January 1996 to date, Senior
Vice President
I-24
Elected to
Name Age Offices and Positions Office
Paul J. Jones 54 Vice President and Comptroller May 1995
Member of Finance Committee
Business Experience: To April 1995, Senior Vice
President - Finance and
Administration, Wyeth-Ayerst
Laboratories Division
May 1995 to date, Vice President
and Comptroller
Rene R. Lewin 53 Vice President - May 1994
Human Resources
Member of Finance and
Retirement Committees
Business Experience: To May 1994, Executive Director
Human Resources - Worldwide
Pharmaceutical Division,
Eli Lilly and Company
May 1994 to date, Vice President
- Human Resources
Thomas M. Nee 60 Vice President - Taxes May 1986
Member of Finance and
Retirement Committees
Business Experience: 1991 to date, Vice President -
Taxes
I-25
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The New York Stock Exchange is the principal market on which the
Company's Common Stock is traded. Tables showing the high and low
sales price for the Common Stock, as reported in the consolidated
transaction reporting system, and the dividends paid per common
share for each quarterly period during the past two years, as
presented in Market Prices of Common Stock and Dividends on page 47
of the Company's 1999 Annual Report to Shareholders, are
incorporated herein by reference.
There were 61,995 holders of record of the Company's Common Stock as
of March 15, 2000.
ITEM 6. SELECTED FINANCIAL DATA
The data with respect to the last five fiscal years, appearing in
the Ten-Year Selected Financial Data presented on pages 28 and 29 of
the Company's 1999 Annual Report to Shareholders, are incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations, appearing on pages 48 through 55 of the
Company's 1999 Annual Report to Shareholders, is incorporated herein
by reference.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Market Risk Disclosures as set forth in Management's Discussion
and Analysis of Financial Condition and Results of Operations,
appearing on page 54 of the Company's 1999 Annual Report to
Shareholders, are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes to Consolidated
Financial Statements on pages 30 through 45 of the Company's 1999
Annual Report to Shareholders, the Report of Independent Public
Accountants on page 46, and Quarterly Financial Data on page 47,
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
II-1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Information relating to the Company's directors is incorporated
herein by reference to pages 2 and 3 of a definitive proxy
statement filed with the Securities and Exchange Commission on
March 17, 2000 ("the 2000 Proxy Statement").
(b) Information relating to the Company's executive officers as of
March 29, 2000 is furnished in Part I hereof under a separate
unnumbered caption ("Executive Officers of the Registrant as of
March 29, 2000").
(c) Information relating to certain filing obligations of directors and
executive officers of the Company under the federal securities laws
set forth on page 5 of the 2000 Proxy Statement under the caption
"Section 16 Beneficial Ownership Reporting Compliance" is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is incorporated
herein by reference to pages 8 through 14 (excluding the performance
graph on page 13) of the 2000 Proxy Statement. Information with
respect to compensation of directors is incorporated herein by
reference to pages 4 and 5 of the 2000 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership is incorporated herein
by reference to pages 6 and 7 of the 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
III-1
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following Consolidated Financial Statements, Notes to
Consolidated Financial Statements and Report of Independent Public
Accountants, included on pages 30 through 46 of the Company's 1999
Annual Report to Shareholders, are incorporated herein by reference.
Pages
Consolidated Balance Sheets as of
December 31, 1999 and 1998 30
Consolidated Statements of Operations
for the years ended December 31,
1999, 1998 and 1997 31
Consolidated Statements of Changes in
Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997 32
Consolidated Statements of Cash Flows
for the years ended December 31, 1999,
1998 and 1997 33
Notes to Consolidated Financial Statements 34-45
Report of Independent Public Accountants 46
(a)2. Financial Statement Schedules
The following consolidated financial information is included in
Part IV of this report:
Pages
Report of Independent Public Accountants on
Supplemental Schedule IV-8
Schedule II - Valuation and Qualifying Accounts
for the years ended December 31, 1999,
1998 and 1997 IV-9
Schedules other than those listed above are omitted because they
are not applicable.
IV-1
ITEM 14. (Continued)
(a)3. Exhibits
Exhibit No. Description
(3.1) The Company's Restated Certificate of Incorporation is
incorporated herein by reference to Exhibit 3.1 of the Company's
Form 10/A dated May 4, 1998.
(3.2) The Company's By-Laws are incorporated herein by reference
to Exhibit 3.2 of the Company's Form 10/A dated May 4, 1998.
(4.1) Indenture, dated as of April 10, 1992, between the Company and
The Chase Manhattan Bank (successor to Chemical Bank), as Trustee,
is incorporated by reference to Exhibit 2 of the Company's
Form 8-A dated August 25, 1992 (File 1-1225).
(4.2) Supplemental Indenture, dated October 13, 1992, between the
Company and The Chase Manhattan Bank (successor to Chemical Bank),
as Trustee, is incorporated by reference to the Company's Form
10-Q for the quarter ended September 30, 1992 (File 1-1225).
(4.3) Rights Agreement, dated as of October 13, 1999, by and between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, is incorporated herein by reference to Exhibit 4.1 of the
Company's Form 8-A, dated October 14, 1999.
(4.4) Amendment to Rights Agreement, dated as of November 3, 1999,
between the Company and ChaseMellon Shareholder Services L.L.C.,
as Rights Agent, is incorporated by reference to Exhibit 4.3 of
the Company's Form 8-A/A dated November 18, 1999.
(4.5) Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company is incorporated herein by
reference to Exhibit 4.2 of the Company's Form 8-A, dated October
14, 1999.
(10.1) B Credit Agreement, dated as of September 9, 1994, among the
Company, American Home Food Products, Inc., Sherwood Medical
Company, A.H. Robins Company, Incorporated, the several banks
and other financial institutions from time to time parties
thereto and The Chase Manhattan Bank (successor to Chemical Bank),
as agent for the lenders thereunder, filed as Exhibit 11(b)(3)
to Amendment No. 7 to the Schedule 14D-1, dated September 22,
1994 (File 1-1225), is incorporated herein by reference.
IV-2
ITEM 14. (Continued)
(a)3. Exhibits
Exhibit No. Description
(10.2) First Amendment to B Credit Agreement, dated as of August 4, 1995,
among the Company, American Home Food Products, Inc., Sherwood
Medical Company, A.H. Robins Company, Incorporated, the several
banks and other financial institutions from time to time parties
thereto and The Chase Manhattan Bank (successor to Chemical Bank),
as agent for the lenders thereunder, is incorporated by reference
to Exhibit 10.4 of the Company's Form 10-K for the year ended
December 31, 1995.
(10.3) Second Amendment to B Credit Agreement, dated as of August 2,
1996, among the Company, American Home Food Products, Inc.,
Sherwood Medical Company, A.H. Robins Company, Incorporated, the
several banks and other financial institutions from time to time
parties thereto and The Chase Manhattan Bank, as agent for the
lenders thereunder, is incorporated by reference to Exhibit 10.6
of the Company's Form 10-K for the year ended December 31, 1996.
(10.4) Third Amendment to B Credit Agreement, dated as of July 31, 1997,
among the Company, Sherwood Medical Company, A.H. Robins Company,
Incorporated, AC Acquisition Holding Company, the several banks
and other financial institutions from time to time parties thereto
and The Chase Manhattan Bank, as agent for the lenders thereunder,
is incorporated by reference to Exhibit 10.8 of the Company's Form
10-K for the year ended December 31, 1997.
(10.5) Letter, dated March 26, 1998, amending the B Credit Agreement,
among the Company, AC Acquisition Holding Company, A.H. Robins
Company, Incorporated, the lender parties thereto and The Chase
Manhattan Bank, as Agent, dated as of September 9, 1994 and as
amended is incorporated herein by reference to Exhibit 10.1 of the
Company's Form 10-Q for the quarter ended March 31, 1998.
(10.6)* 1980 Stock Option Plan, as amended, is incorporated by reference
to Exhibit 10.3 of the Company's Form 10-K for the year ended
December 31, 1991 (File 1-1225).
(10.7)* Amendment to the 1980 Stock Option Plan is incorporated by
reference to Exhibit 10.7 of the Company's Form 10-K for the year
ended December 31, 1995 (File 1-1225).
(10.8)* 1985 Stock Option Plan, as amended, is incorporated by reference
to Exhibit 10.4 of the Company's Form 10-K for the year ended
December 31, 1991 (File 1-1225).
*Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
IV-3
ITEM 14. (Continued)
(a)3. Exhibits
Exhibit No. Description
(10.9)* Amendment to the 1985 Stock Option Plan is incorporated by
reference to Exhibit 10.9 of the Company's Form 10-K for the year
ended December 31, 1995 (File 1-1225).
(10.10)* Amendment to the 1985 Stock Option Plan is incorporated by
reference to Exhibit 10.12 of the Company's Form 10-K for the year
ended December 31, 1996.
(10.11)* 1990 Stock Incentive Plan is incorporated by reference to Exhibit
28 of the Company's Form S-8 Registration Statement File No.
33-41434 under the Securities and Exchange Act of 1933, filed June
28, 1991 (File 1-1225).
(10.12)* Amendment to the 1990 Stock Incentive Plan is incorporated by
reference to Exhibit 10.13 of the Company's Form 10-K for the year
ended December 31, 1995 (File 1-1225).
(10.13)* Amendment to the 1990 Stock Incentive Plan is incorporated by
reference to Exhibit 10.21 of the Company's Form 10-K for the year
ended December 31, 1996.
(10.14)* 1993 Stock Incentive Plan, as amended to date, is incorporated by
reference to Appendix III of the Company's definitive Proxy
Statement filed March 18, 1999.
(10.15)* 1996 Stock Incentive Plan, as amended to date, is incorporated by
reference to Appendix II of the Company's definitive Proxy
Statement filed March 18, 1999.
(10.16)* 1999 Stock Incentive Plan is incorporated by reference to Appendix
I of the Company's definitive Proxy Statement filed March 18,
1999.
(10.17)* Form of Stock Option Agreement (phased vesting).
(10.18)* Form of Special Stock Option Agreement (phased vesting) is
incorporated by reference to Exhibit 10.27 of the Company's Form
10-K for the year ended December 31, 1995 (File 1-1225).
(10.19)* Form of Special Stock Option Agreement (three-year vesting) is
incorporated by reference to Exhibit 10.28 of the Company's Form
10-K for the year ended December 31, 1995 (File 1-1225).
(10.20)* Amendment to Special Stock Option Agreement is incorporated by
reference to Exhibit 10.30 of the Company's Form 10-K for the year
ended December 31, 1996.
*Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
IV-4
ITEM 14. (Continued)
(a)3. Exhibits
Exhibit No. Description
(10.21)* Form of Stock Option Agreement(transferable options).
(10.22)* Form of Restricted Stock Performance Award Agreement under the
1996 Stock Incentive Plan and 1999 Stock Incentive Plan (Initial
Award).
(10.23)* Form of Restricted Stock Performance Award Agreement under the
1996 Stock Incentive Plan and 1999 Stock Incentive Plan
(Subsequent Award).
(10.24)* Special Restricted Stock Performance Award Agreement under the
1996 Stock Incentive Plan for William J. Murray is incorporated by
reference to Exhibit 10.24 of the Company's Form 10-K for the year
ended December 31, 1998.
(10.25)* Amendment to the Special Restricted Stock Performance Award
Agreement under the 1996 Stock Incentive Plan for William J.
Murray.
(10.26)* Restricted Stock Trust Agreement under the 1993 Stock Incentive
Plan is incorporated by reference to Exhibit 10.23 of the
Company's Form 10-K for the year ended December 31, 1995 (File
1-1225).
(10.27)* Management Incentive Plan, as amended to date.
(10.28)* 1994 Restricted Stock Plan for Non-Employee Directors, as amended
to date, is incorporated by reference to Exhibit 10.27 of the
Company's Form 10-K for the year ended December 31, 1998.
(10.29)* Stock Option Plan for Non-Employee Directors is incorporated by
reference to Exhibit 10.28 of the Company's Form 10-K for the year
ended December 31, 1998.
(10.30)* Form of Stock Option Agreement under the Stock Option Plan for
Non-Employee Directors.
(10.31)* Savings Plan, as amended, is incorporated by reference to Exhibit
99 of the Company's Form S-8 Registration Statement File No.
33-50149 under the Securities and Exchange Act of 1933, filed
September 1, 1993 (File 1-1225).
*Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
IV-5
ITEM 14. (Continued)
(a)3. Exhibits
Exhibit No. Description
(10.32)* Retirement Plan for Outside Directors, as amended on January 27,
1994, is incorporated by reference to Exhibit 10.12 of the
Company's Form 10-K for the year ended December 31, 1993
(File 1-2225).
(10.33)* Directors' Deferral Plan is incorporated by reference to Exhibit
10.37 of the Company's Form 10-K for the year ended December 31,
1996.
(10.34)* Deferred Compensation Plan, as amended to date.
(10.35)* Executive Retirement Plan is incorporated by reference to Exhibit
10.2 of the Company's Form 10-Q for the quarter ended September
30, 1997.
(10.36)* Supplemental Employee Savings Plan is incorporated by reference to
Exhibit 10.42 of the Company's Form 10-K for the year ended
December 31, 1997.
(10.37)* Supplemental Executive Retirement Plan is incorporated by
reference to Exhibit 10.6 of the Company's Form 10-K for the year
ended December 31, 1990 (File 1-1225).
(10.38)* American Cyanamid Company's Supplemental Executive Retirement Plan
is incorporated by reference to Exhibit 10K of American Cyanamid
Company's Form 10-K for the year ended December 31, 1988 (File
1-3426).
(10.39)* American Cyanamid Company's Supplemental Employees Retirement Plan
Trust Agreement, dated September 19, 1989, between American
Cyanamid Company and Morgan Guaranty Trust Company of New York is
incorporated by reference to Exhibit 10K of American Cyanamid
Company's Form 10-K for the year ended December 31, 1989 (File
1-3426).
(10.40)* American Cyanamid Company's ERISA Excess Retirement Plan is
incorporated by reference to Exhibit 10N of American Cyanamid
Company's Form 10-K for the year ended December 31, 1988 (File
1-3426).
(10.41)* American Cyanamid Company's Excess Retirement Plan Trust
Agreement, dated September 19, 1989, between American Cyanamid
Company and Morgan Guaranty Trust Company of New York is
incorporated by reference to Exhibit 10M of American Cyanamid
Company's Form 10-K for the year ended December 31, 1989 (File
1-3426).
*Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
IV-6
ITEM 14. (Continued)
(a)3. Exhibits
Exhibit No. Description
(10.42)* Form of Severance Agreement entered into between the Company and
the executive officers specified therein is incorporated by
reference to Exhibit 10.43 of the Company's Form 10-K for the year
ended December 31, 1997.
(10.43)* Form of Severance Agreement entered into between the Company and
the executive officers specified therein is incorporated by
reference to Exhibit 10.1 of the Company's Form 10-Q for the
quarter ended June 30, 1998.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 1999 Annual Report to Shareholders. Such report, except for those
portions thereof which are expressly incorporated by reference
herein, is furnished solely for the information of the Commission
and is not to be deemed "filed" as part of this filing.
(21) Subsidiaries of the Company.
(23) Consent of Independent Public Accountants relating to their report
dated January 25, 2000, consenting to the incorporation thereof in
Registration Statements on Form S-3 (File Nos. 33-45324 and
33-57339) and on Form S-8 (File Nos. 2-96127, 33-24068, 33-41434,
33-53733, 33-55449, 33-45970, 33-14458, 33-50149, 33-55456,
333-15509 and 333-76939) by reference to the Form 10-K of the
Company filed for the year ended December 31, 1999.
(27) Financial Data Schedule.
(99) Cautionary Statements regarding "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by the
Company (each including disclosure under Items 5 and 7): October
8, 1999 and November 24, 1999 each relating to the national
settlement of the diet drug litigation; October 14, 1999 relating
to the adoption of a shareholder rights plan (poison pill);
November 8, 1999, November 9, 1999, November 18, 1999, November
19, 1999, November 22, 1999, December 17, 1999 and February 7,
2000 each relating to the proposed merger with Warner-Lambert
Company which has been terminated.
*Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
IV-7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Home Products Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in American Home Products
Corporation's Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 25, 2000. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the accompanying index is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken as
a whole.
ARTHUR ANDERSEN LLP
New York, New York
January 25, 2000
IV-8
American Home Products Corporation and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
Column A Column B Column C Column D Column E
Balance Balance
at at
Beginning Deductions End
of Period Additions (A) of Period
Description
Year ended 12/31/99:
Allowance for doubtful accounts $183,069 $68,117 $52,293 $198,893
Allowance for cash discounts 39,471 249,629 247,885 41,215
Allowance for deferred tax assets 249,051 13,005 110,647 151,409
$471,591 $330,751 $410,825 $391,517
Year ended 12/31/98:
Allowance for doubtful accounts $168,425 $58,685 $44,041 $183,069
Allowance for cash discounts 28,730 236,273 225,532 39,471
Allowance for deferred tax assets 299,424 10,245 60,618 249,051
$496,579 $305,203 $330,191 $471,591
Year ended 12/31/97:
Allowance for doubtful accounts $179,980 $9,974 $21,529 $168,425
Allowance for cash discounts 24,141 226,284 221,695 28,730
Allowance for deferred tax assets 294,840 19,486 14,902 299,424
$498,961 $255,744 $258,126 $496,579
(A) Represents amounts used for the purposes for which the accounts were
created and reversal of amounts no longer required.
IV-9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION
(Registrant)
March 29, 2000 By /S/ Kenneth J. Martin
Kenneth J. Martin
Senior Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signatures Title Date
Principal Executive Officer:
/S/ John R. Stafford Chairman, President March 29, 2000
John R. Stafford and Chief Executive Officer
Principal Financial Officer:
/S/ Kenneth J. Martin Senior Vice President March 29, 2000
Kenneth J. Martin and Chief Financial Officer
Principal Accounting Officer:
/S/ Paul J. Jones Vice President and March 29, 2000
Paul J. Jones Comptroller
Directors:
/S/ Clifford L. Alexander, Jr. Director March 29, 2000
Clifford L. Alexander, Jr.
/S/ Frank A. Bennack, Jr. Director March 29, 2000
Frank A. Bennack, Jr.
/S/ Robert Essner Director March 29, 2000
Robert Essner
/S/ John D. Feerick Director March 29, 2000
John D. Feerick
IV-10
Signatures Title Date
/S/ John P. Mascotte Director March 29, 2000
John P. Mascotte
/S/ Mary Lake Polan, M.D., Ph.D. Director March 29, 2000
Mary Lake Polan, M.D., Ph.D.
/S/ Ivan G. Seidenberg Director March 29, 2000
Ivan G. Seidenberg
/S/ John R. Torell III Director March 29, 2000
John R. Torell III
IV-11
INDEX TO EXHIBITS
Exhibit No. Description
(10.17)* Form of Stock Option Agreement (phased vesting).
(10.21)* Form of Stock Option Agreement (transferable options).
(10.22)* Form of Restricted Stock Performance Award Agreement under the
1996 Stock Incentive Plan and 1999 Stock Incentive Plan (Initial
Award).
(10.23)* Form of Restricted Stock Performance Award Agreement under the
1996 Stock Incentive Plan and 1999 Stock Incentive Plan
(Subsequent Award).
(10.25)* Amendment to the Special Restricted Stock Performance Award
Agreement under the 1996 Stock Incentive Plan for William J.
Murray.
(10.27)* Management Incentive Plan, as amended to date.
(10.30)* Form of Stock Option Agreement under the Stock Option Plan for
Non-Employee Directors.
(10.34)* Deferred Compensation Plan, as amended to date.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 1999 Annual Report to Shareholders. Such report, except for
those portions thereof which are expressly incorporated by
reference herein, is furnished solely for the information of
the Commission and is not to be deemed "filed" as part of
this filing.
(21) Subsidiaries of the Company.
(23) Consent of Independent Public Accountants relating to their
report dated January 25, 2000, consenting to the incorporation
thereof in Registration Statements on Form S-3 (File Nos.
33-45324 and 33-57339) and on Form S-8 (File Nos. 2-96127,
33-24068, 33-41434, 33-53733, 33-55449, 33-45970, 33-14458,
33-50149, 33-55456, 333-15509 and 333-76939) by reference to
the Form 10-K of the Company filed for the year ended
December 31, 1999.
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
INDEX TO EXHIBITS
(Continued)
Exhibit No. Description
(27) Financial Data Schedule.
(99) Cautionary Statements regarding "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.